Planning for continental free trade area essential

11 Aug, 2019 - 00:08 0 Views

The Sunday Mail

Trade Focus
Allan Majuru

The continent-wide free trade, whose operational phase will start in July 2020, presents opportunities for local businesses to expand into African markets with ease.

When fully operational, the African Continental Free Trade Area (AfCFTA) is expected to increase trade within Africa by more than 52 percent by 2022.

It will also bring together all the 55 African Union (AU) member states, creating a combined market of more than 1,2 billion people with a combined gross domestic product (GDP) of more than US$3,4 trillion.

Targeting increased economic integration within the continent, the trade agreement will create a single market for goods and services.

However, opening of markets means big companies from big economies such as South Africa, Namibia and Egypt will likely find it easy to penetrate local markets, including Zimbabwe’s traditional markets in the Sadc and Comesa region.

Although the continental trade agreement presents such a challenge, local businesses should leverage on the comparative and competitive advantages of some sectors and regional markets to gain more market share.

The 2017 Observatory of Economic Complexity report — considered the world’s leading data visualisation tool for international trade data — states that Zimbabwe has global comparative advantage in 86 products, including minerals and horticultural produce.

Identifying where, out of these 86 products and their value chains, one has capacity to value-add could be a starting point in leveraging on the continental trade agreement.

Enterprises that play a part in the value chains of the identified products could be assisted by various financial institutions to retool and improve on their production efficiencies.

Institutions with free funds can invest into processing industries and reap the dividends as Zimbabwe’s exports grow into the continent.

In addition, given Zimbabwe’s favourable climatic conditions, which are suitable for production of a variety of plants, local businesses can fully utilise this advantage to specialise on niche products for exports.

Horticulture remains one the highest foreign-currency earners for Zimbabwe and is a low-hanging fruit that can be used by local businesses to establish and increase market share to other countries. Value addition for horticulture produce would also ensure that local enterprises maximise on revenue, as processed products earn more than raw materials.

Zimbabwe has some of leading value-added products such as orange crushes and other soft drinks that are in demand across the globe.

These could be used as key products to support growth of export earnings.

Other sectors that can support the key products are clothing and leather.

Zimbabwe has one of the best cotton in the world and used to produce and export fabric across the world in the past.

Support to the cotton value chain, which promotes value addition of our cotton, is one of the interventions that can be done to prepare Zimbabwe to benefit from this continental trade agreement.

Further to this, Zimbabwe currently has abundant raw hides that can be value-added through processing into various leather products.

Currently, there are eight tanneries in Zimbabwe, and these can produce leather products for export into the region, whilst setting up pace to supply the rest of the continent.

Thus, using some of the current successful export products as a benchmark for penetrating foreign markets, local businesses should consider maximising on product efficiencies within the Southern African Development Community (Sadc) and Common Market for Eastern and Southern Africa (Comesa) regions.

As the continental trade agreement opens, larger economies also present export opportunities for local businesses and should not be viewed purely as a threat to local businesses.

For example, Nigeria has a market for Zimbabwean products such as sugar, fish, malt, black tea and peas.

There is also a market for wood furniture and construction materials such as doors and windows, indicating that if local companies work hard, they can tap into all African countries, regardless of size.

There is also need to map logistics requirements in terms of competitively transporting goods to those markets.

Surveys conducted by ZimTrade in South Sudan and Angola have shown the need to come up with efficient transport routes to certain markets as the demand for Zimbabwean products is increasing across the continent.

Over the past few years, ZimTrade — the national trade development and promotion organisation — has been focusing on promoting local companies’ share of the regional and continental market.

This is being done through market surveys where opportunities are identified, development of local companies to be export competitive, as well as promotion of local products in these regional markets.

Recently, ZimTrade has facilitated the participation of local companies at the Zambia Agricultural and Commercial Show as well as Botswana Global Expo, where local companies were presented with an opportunity to sell their products beyond Zimbabwean borders.

ZimTrade is also facilitating the participation of local companies in the AfCFTA trade show that is being organised by the Afreximbank to be held in Rwanda in 2020.

This is a follow-up event to the one held in Egypt in December 2018.

 

Allan Majuru is ZimTrade’s chief executive officer.

 

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